ADVANCED ENZYME TECHNOLOGIES

Growing global enzyme footprint

Advanced Enzyme Technologies may be a small cap but it’s the largest enzyme manufacturing company in India. During the last two decades, it has transformed itself into a global enzyme powerhouse based on its R&D and tech innovation. It manufactures 400-plus proprietary products developed from over 68 indigenous enzymes and products. The company is one of the few manufacturers in the world to possess great depth and expertise in fermented manufacturing. AET has excellent growth prospects going ahead.

Consider:

• The company caters to diversified industries and verticals like human nutrition, animal nutrition and bio-processing. It provides its proprietary enzyme products and customized enzyme products to various pharmaceutical and nutraceutical companies in India, other Asian countries, North America and Europe. The company has state-of-the-art manufacturing facilities and R&D centres across India, the US and Germany
• AET has expanded its operations through the acquisition route. It acquired several companies, including CalIndia Foods International (which gave AET a direct presence in the US), Advanced Supplementary Technologies Corporation (which consolidated its presence in the US), JC Biotech Pvt Ltd, AEM of Malaysia and Evoxx Technologies GmbH. Today, the company has three wholly owned subsidiaries, three joint ventures and five step-down subsidiaries, all of which help AET service 700 clients spread across 45 countries.
• With these acquisitions, the company has made slow but steady progress on the financial front. During the last 11 years, its sales turnover has advanced from Rs 116 crore in fiscal 2011 to Rs 502 crore in fiscal 2021, with the operating profit growing from Rs 23 crore to Rs 232 crore and the net profit inching up from Rs 17 crore to Rs 146 crore during this period. The company’s financial position is very strong, with reserves at the end of March 2021 standing at Rs 948 crore – more than 43 times its equity capital of Rs 22 crore. As its debt is negligible (Rs 23 crore), it is virtually a debt-free company.

GLOBAL POTENTIAL

From 2022 to 2028, the global technical enzymes market is expected to develop at a fast pace, according to the latest MarketsandResearch.biz document. For the forecast period, the paper proposes a marketshare estimation in terms of volumes. This study looks at the market definition, classifications, applications, engagements and global technical enzymes enterprise trends.

The local evaluation phase reveals the substantial capability of every region in the global technical enzymes marketplace collectively with its period and amount. The study explains expansion techniques and procedures, estimates, production processes and fee structures. It also consists of product offerings, revenue evaluation, production capabilities, gross margins and numerous different crucial elements that effect the profitability of the company involved in the market. Advanced Enzymes Technologies will be one of the major beneficiaries of this market potential.

• Prospects ahead are highly promising as enzymes are used in a wide variety of industries like human healthcare and nutrition, animal nutrition, banking, fruit and vegetable processing, brewing and malting, grain processing, protein modification, dairy processing, speciality applications and textile processing. The management expects sales to cross the Rs 1,000-crore mark within the next five years, with a corresponding improvement in earnings.
• The company’s shareholding is in strong hands, with the promoters holding 52.55 per cent, foreign institutional investors (FIIs) 16.27 per cent and domestic institutional investors (DIIs) 8.67 per cent.

CONSOLIDATED PERFORMANCE INDICATORS (Rs. in crore)

ADC INDIA COMMUNICATIONS

Financials poor, potential high

Headquartered in Bengaluru, ADC India Communications (formerly known as Krone Communications) is a leading player in broadband connectivity and provides connection solutions for wireline, wireless, cable broadcast and enterprise networks. The company is an undisputed leader in providing network infrastructure products and services that support its customers in migration to next generation networks. It plays a crucial role in enabling customers to deliver dynamic video, data, voice and wireless services that are increasingly essential to telcos, enterprises and infrastructure providers. Despite its important role, ADC’s shares are quoted at below intrinsic value and hence are worth buying.

Consider:

• The telecom sector continues to be at the epicentre for growth, innovation and disruption for virtually any industry. According to a study, smartphones today account for two out of every three mobile connections globally. Mobile devices and related broadband connectivity continue to be more and more embedded in our daily life and are key in driving the momentum around key trends like video streaming, Internet of Things (IoT) and mobile payments. This trend is a key growth driver for ADC India Communications.
• The company expects higher growth in the medium term driven by demand from infrastructure projects, the defence sector, e-commerce, hospitality, education, IT/ITeS and government projects. The company expects growth in the fiber business vis-à-vis copper due to the large infrastructure corridors, the national fiber optic network, and the ‘Digital India’ and ‘Smart City’ initiatives.
• ADC has introduced new products like a fiber and copper patch lock system, which helps customers look at an additional level of physical security in critical connectivity requirements, and also continues its work in supporting highdensity fiber requirements for co-locations with better manageability feature
• Communications service providers across the globe are continuing their rapid migration to next-generation networks that can deliver reliable broadband services over any device anytime, anywhere. At the same time, high speed enterprise networks and data centres continue to be built to meet the challenge of transmitting and storing the vast amounts of information critical for success in modern business. The need for ubiquitous access, scalable bandwidth and robust, reliable connectivity is no different for a carrier, cable company or enterprise. All depend on ADC's network infrastructure expertise to help them design and deploy high-speed wired networks offering dynamic video, data, and voice to businesses and consumers.
• The company has also introduced new products that would cater to the telecom market such as fiber-to-antenna and copper-to-antenna products that will help support upcoming 4G projects. It has also introduced outdoor environment enclosures/cable assembly products to support the security and surveillance market and continues its focus on a standard-compliant product portfolio to increase its geographical reach
• The company’s financial performance so far is not that heart-warming. During the last five years, its sales have declined marginally from Rs 62.32 crore in fiscal 2017 to Rs 126.60 crore in fiscal 2021, with the operating profit inching up fractionally from Rs 3.63 crore to Rs 4.84 crore and the net profit declining from Rs 3.82 crore to Rs 3.62 crore during this period. A plus point for the company is that it is a debtfree entity and is regular in payment of dividends, the rate for the last year being 25 per cent.

According to research analysts, at the current price of Rs. 380, the scrip is undervalued on the basis of its intrinsic value, which is Rs 522 as determined by the median of 3 historical modes.

PERFORMANCE INDICATORS (Rs. in crore)